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Retail NBN will cost the govt: Telstra

Telstra has sent a letter to shareholders saying that the Federal Government's National Broadband Network (NBN) draft legislation, which enables NBN Co to sell retail services, will change its financial demands over its separation.
Written by Liam Tung, Contributing Writer

Telstra has sent a letter to shareholders saying that the Federal Government's National Broadband Network (NBN) draft legislation, which enables NBN Co to sell retail services, will change its financial demands over its separation.

Telstra CEO David Thodey

David Thodey talking to Telstra CFO John Stanhope
(Credit: Liam Tung/ZDNet.com.au)

"Although it is only draft legislation, it raises for the first time the prospect of NBN Co becoming a government-funded retailer, not just a wholesale network provider," Telstra chief David Thodey and chairman Catherine Livingstone said.

The government's draft NBN legislation, which indicated the government may allow NBN Co to sell services to government agencies, has thrown a spanner in the works, according to Telstra.

The proposed widening of NBN Co's market under the draft NBN legislation would put NBN Co in direct competition with Telstra.

"We are very concerned about this potential change in the government's position. If enacted, we would need to factor this into the financial consideration required to achieve an agreement that is in the company's and your best interests," Thodey and Livingstone said.

Telstra reiterated its stance that the government's plan to separate it is "likely to destroy shareholder value", while the threat to withhold it from 4G spectrum makes its negotiations over its separation more difficult.

Telstra said it would make its case clear in its response to the draft legislation. Responses to the draft are due by 15 March — the Monday of the week the government is likely to attempt to reintroduce the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009, after its failure to get the Bill heard last week.

If passed, the Bill would give Telstra about nine months to submit a structural separation undertaking to the Australian Competition and Consumer Commission, or face the government's tough sanctions under a functional separation. Telstra reminded shareholders today that functional separation would cost about $1 billion.

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